The console sector is at a crossroads, and a look at the numbers behind Xbox 360 and PS3 make for uncomfortable reading.

According to numbers presented by former EA and Sony man Ben Cousins on Kotaku, between them Xbox 360 and PS3 have left an $8bn black hole in the coffers of Microsoft and Sony.

Specifically, using financial reports from the pair it is claimed that despite its tremendous success, Xbox 360 has cost Microsoft a total of $2.996bn. The news is even worse for Sony, with PS3 having registered a total loss for the company of $4.951bn.

Microsoft was open about its willingness to throw its money at Xbox when it made its first foray into console gaming in 2002. But ten years down the line and so severely out of pocket, that appetite can surely last for only so long.

Cousins uses the data to argue that consoles as we know it are nearing extinction.

“What I think will probably happen is that, as smartphones and tablets continue to get more and more powerful (and they are increasing in power faster than any other class of device), and as more and more publishers start to actively target those ‘mainstream console gamers’ with mobilegames, more and more of those people will gradually move their gaming hours and dollars away from console gaming to their mobile devices,” he stated.

“Without this huge group of people buying consoles or console games, the console platform holders will no longer be able to make enough money to justify developing, marketing and manufacturing the devices.

“It doesn't matter that there will ‘always be a market for consoles’ among the hardcore, because the console model as we know it relies so much on the money from the ‘mainstream console gamers’.

“In the future, I see gaming as having two main markets: A) Mobile devices like smartphones and tablets will serve the biggest market—covering kids, casual gamers and the mainstream console people. B) The core and ultra-core gamers would be served by PC gaming, which will be smaller than mobile, but that will continue to grow.

“Many of the old-school PC gamers I know that moved to playing games on Xbox over the last 10 years are coming back to PC because of free-to-play and indie games, controller and TV support, as well as incredible digital distribution on platforms like Steam.”

Indeed, the 2013 arrival of Valve’s Steambox and, to a lesser extent, dedicated Android platforms like the Nvdia Shield, any new console launches are going to find themselves up against far sterner competition than either Microsoft or Sony would likely of envisaged when they began designing their machines.

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The 360 has been profitable though so the overall losses are thanks to the first Xbox. In other words, MS is on the right path.
It's worse for Sony who went from a profitable platform to a huge money eater.

There really isnt any way to actually know how much the consoles have cost since both are buried in divisions with other products. Im pretty sure the 360 has probably at least made up its losses at this point in time. The original xbox probably not. Ps3 is probably still in the red, but sony has had other gaming hardware on sell that have sold at a profit during the same time frame.

Comments like this about the death of games consoles annoy me, because it over looks the fact that people like games consoles. They don't want to play on a tablet or PC. They like playing on their TV, they like a controller.

XBox and PS3 were over-spec'd for various reasons. It was a bad decision by both companies...but neither has games as their main focus. If they were true games companies they would have followed the Nintendo pattern of making systems as they would have needed to actually make money. I'm just glad Nintendo was able to stick around, unlike Sega.